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Dominic Grieve, the Conservative MP and former attorney general, has called for an urgent side-deal on EU citizens’ rights post-Brexit to secure their future in the event Britain crashes out of the bloc without an agreement with Brussels.

Grieve said it was paramount to ringfence a deal that secures employment and social rights in order to protect both the estimated 3.2 million EU citizens in the UK and the 1.2 million British nationals on the continent from further uncertainty about their futures.

“I would regard it as essential to be able to ringfence a deal, otherwise it is going to be a serious problem for both EU nationals and UK nationals, which I think is unacceptable,” he said.

Grieve, MP for Beaconsfield, was speaking after addressing hundreds of anxious EU citizens who assembled in Westminster to lobby MPs to secure their rights as part of a campaign day organised by the grassroots organisation the3million.

He is one of a handful of Tory MPs calling for significant amendments to the EU withdrawal bill, which passed its second reading in the Commons on Tuesday.

Dominic Grieve QC MP. Photograph: Linda Nylind for the Guardian

Among those gathered in Westminster were Peter and Sabine Klepsch, two German medical consultants who have lived in the UK for the past 12 years.

“We are thinking a bit more about going back to Germany,” said Peter, 51, who is an anaesthetist in Bristol.

He said he did not believe the “golden, shiny promises” made by politicians about their future rights and although he and his neuroscientist wife were free to leave the country, he feared for the future of the NHS.

“I know a lot of EU doctors and nurses who are saying: ‘I’m not going to stay very much longer.’ With the NHS on its knees, losing anyone is a disaster,” said Peter.

Although both EU and UK leaders have tried to reassure EU citizens on both sides of the channel that their future rights will be secured, there was an overwhelming sense of fear and uncertainty among those gathered at the Emmanuel Centre in Westminster.

Inside parliament, Hilary Benn, the Labour chair of the Brexit select committee, told campaigners at the launch of the All Party Parliamentary Group for Britons in the EU that he did not believe the UK and EU were “miles apart” on EU citizens.

But he said there were still fundamental differences to be resolved, including the jurisdiction of the European court of justice, rights of family members and criminality checks before residency was granted.

Benn said he thought the negotiations had been hampered by the attitude of some in the government, including the prime minister. “Things were said and impressions given that have, in my view, greatly damaged the UK’s standing the world because … people felt Britain doesn’t want us any more, which is certainly not the case.

“When the prime minister went to the European council to tell them all would be well, instead of saying 3 million citizens could stay here and were valued, it was reported she said: ‘Don’t worry, no one is going to be deported.’ In my visit to Brussels last week, people told me that eyes widened when she arrived; instead of offering reassurances, she spoke about deportation.”

Benn said he also accepted the view of EU citizens who said the current process for applying for residency via an 85-page form was unacceptable as a process for 3 million people. “The government is going to have to come up with a much, much simpler system to do this … the current system is a complete non-starter,” he said.

Jane Golding, a British lawyer who lives in Germany and is chair of the campaign group British in Europe, said that unless the UK showed flexibility she did not see the EU moving its position.

The future of EU citizens, along with the exit bill and the Northern Ireland border with Ireland, are the three priorities in the first round of Brexit talks.

So far, however, fewer than half of the issues raised in talks on EU citizens have been agreed.

“I would like to see this [talks on EU citizens] accelerated; we need to have a deal for EU citizens and UK nationals. As it’s a human issue, it’s in everyone’s interests that a deal is done as quickly as possible,” said Grieve.

To cheers, he told EU citizens that “irrationality tends often to be the hallmark of some [Brexiters]”, but he said this was because some “people are ignorant or spend too much time, I’m afraid, reading the Daily Mail”.

He said nobody in his party had suggested EU citizens should be turfed out and he had “every confidence that not a single one of you in this room will ever be required to leave the United Kingdom”, he said.

However, he re-iterated the Tory position that the EU deal could not include any oversight for the European court of justice.

Paul Blomfield, the Labour MP for Sheffield Central, called on the government to send out “a strong message” to employers and landlords that discrimination against EU citizens was unacceptable.

Earlier this week, the Guardian revealed that the government Equalities Office was to examine growing evidence that EU nationals in the UK were being illegally prevented from renting or buying properties, getting jobs and booking holidays, after Blomfield submitted a dossier of examples compiled by the3million.